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Evidence of in-play insider trading on a UK betting exchange

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  • Alasdair Brown

    () (Department of Financial and Management Studies - SOAS, University of London)

Abstract

An open question in market microstructure is whether 'informed' traders have an advantage due to access to private, inside, information; or due to a superior ability to process public information. In this paper we attempt to answer this question with data from a sports betting exchange taken during play. Uniquely, this allows us to time-stamp information events to the nearest second, and to ensure we are observing all relevant information regarding the value of an asset. We find evidence of inside information but not of a superior ability to process public information. The first finding suggests that a subset of the betting population are observing the action before the wider public (possibly due to delays in the television signal), and betting using this informational advantage.

Suggested Citation

  • Alasdair Brown, 2011. "Evidence of in-play insider trading on a UK betting exchange," Post-Print hal-00670250, HAL.
  • Handle: RePEc:hal:journl:hal-00670250
    DOI: 10.1080/00036846.2010.537644
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00670250
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    File URL: https://hal.archives-ouvertes.fr/hal-00670250/document
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    References listed on IDEAS

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    1. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2005. "Market microstructure: A survey of microfoundations, empirical results, and policy implications," Journal of Financial Markets, Elsevier, vol. 8(2), pages 217-264, May.
    2. Lee, Charles M C & Mucklow, Belinda & Ready, Mark J, 1993. "Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 345-374.
    3. Amihud, Yakov & Mendelson, Haim, 1980. "Dealership market : Market-making with inventory," Journal of Financial Economics, Elsevier, vol. 8(1), pages 31-53, March.
    4. Stoll, Hans R, 1978. "The Supply of Dealer Services in Securities Markets," Journal of Finance, American Finance Association, vol. 33(4), pages 1133-1151, September.
    5. Hasbrouck, Joel, 2007. "Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading," OUP Catalogue, Oxford University Press, number 9780195301649.
    6. Vaughan Williams,Leighton (ed.), 2005. "Information Efficiency in Financial and Betting Markets," Cambridge Books, Cambridge University Press, number 9780521816038.
    7. Krinsky, Itzhak & Lee, Jason, 1996. " Earnings Announcements and the Components of the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 51(4), pages 1523-1535, September.
    8. Shin, Hyun Song, 1993. "Measuring the Incidence of Insider Trading in a Market for State-Contingent Claims," Economic Journal, Royal Economic Society, vol. 103(420), pages 1141-1153, September.
    9. I. Krinsky & J. Lee, 1996. "Earning Announcements and the Components of the Bid-Ask Aspread," Quantitative Studies in Economics and Population Research Reports 313, McMaster University.
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    Keywords

    Social Sciences & Humanities;

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